Cleveland State University
(a component unit of the State of Ohio)
Financial Report
Including Supplemental Information
June 30, 2014
Contents
Report of Independent Auditors
1-3
Management’s Discussion and Analysis
4-12
Basic Financial Statements
Statement of Net Position
13
Statement of Revenue, Expenses, and Changes in Net Position
14
Statement of Cash Flows
15-16
Statements of Financial Position (Component Units):
The Cleveland State University Foundation, Inc.
Euclid Avenue Development Corporation
17
18
Statements of Activities (Component Units):
The Cleveland State University Foundation, Inc.
Euclid Avenue Development Corporation
19
20
Notes to Financial Statements
21-38
Independent Auditor's Report
To the Board of Trustees
Cleveland State University
Report on the Financial Statements
We have audited the accompanying financial statements of Cleveland State University (the "University"),
and its aggregate discretely presented component units, The Cleveland State Foundation, Inc. and Euclid
Avenue Development Corporation, as of and for the years ended June 30, 2014 and 2013 and the related
notes to the financial statements, which collectively comprise Cleveland State University's basic financial
statements as listed in the table of contents. These financial statements are reported as a component unit
of the State of Ohio.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or
error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We did not
audit the financial statements of The Cleveland State University Foundation, Inc. (the "Foundation") and
Euclid Avenue Development Corporation (the "Corporation"), which represent all of the balances and
activity reported in the aggregate discretely presented component units. Those financial statements were
audited by other auditors, whose report has been furnished to us, and our opinion, insofar as it relates to
the amounts included for the Foundation and Corporation, is based solely on the report of the other
auditors. We conducted our audits in accordance with auditing standards generally accepted in the
United States of America and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating
the appropriateness of accounting policies used and the reasonableness of significant accounting
estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
1
To the Board of Trustees
Cleveland State University
Opinion
In our opinion, based on our audit and the report of other auditors, the financial statements referred to
above present fairly, in all material respects, the financial position of Cleveland State University and its
aggregate discretely presented component units as of June 30, 2014 and 2013 and the changes in its
financial position and, where applicable, its cash flows for the years then ended, in accordance with
accounting principles generally accepted in the United States of America.
Emphasis of Matter
As discussed in Note 1 to the basic financial statements, effective July 1, 2013, the University adopted
new accounting guidance under GASB Statement No. 65, Items Previously Reported as Assets and
Liabilities. The statement establishes accounting and financial reporting standards that require expensing
of bond issuance costs and reclassify, as deferred outflows and inflows of resources, certain items that
were previously reported as assets and liabilities. Our opinion is not modified with respect to this matter.
Other Matters
Required Supplemental Information
Accounting principles generally accepted in the United States of America require that the management's
discussion and analysis, as show on pages 4-12, be presented to supplement the basic financial
statements. Such information, although not a part of the basic financial statements, is required by the
Governmental Accounting Standards Board, which considers it to be an essential part of financial
reporting for placing the basic financial statements in an appropriate operational, economic, or historical
context. We have applied certain limited procedures to the required supplementary information in
accordance with auditing standards generally accepted in the United States of America, which consisted
of inquiries of management about the methods of preparing the information and comparing the
information for consistency with management's responses to our inquiries, the basic financial statements,
and other knowledge we obtained during our audit of the basic financial statements. We do not express
an opinion or provide any assurance on the information because the limited procedures do not provide us
with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise Cleveland State University's basic financial statements. The schedule of expenditures of
federal awards is presented for the purpose of additional analysis and is not a required part of the basic
financial statements.
The schedule of expenditures of federal awards is the responsibility of management and was derived
from and relates directly to the underlying accounting and other records used to prepare the basic
financial statements. Such information has been subjected to the auditing procedures applied in the audit
of the basic financial statements and certain additional procedures, including comparing and reconciling
such information directly to the underlying accounting and other records used to prepare the basic
financial statements or to the basic financial statements themselves, and other additional procedures in
accordance with auditing standards generally accepted in the United States of America. In our opinion,
the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the
basic financial statements as a whole.
2
To the Board of Trustees
Cleveland State University
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated October 15,
2014 on our consideration of Cleveland State University's internal control over financial reporting and on
our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements, and
other matters. The purpose of that report is to describe the scope of our testing of internal control over
financial reporting and compliance and the results of that testing, and not to provide an opinion on the
internal control over financial reporting or on compliance. That report is an integral part of an audit
performed in accordance with Government Auditing Standards in considering Cleveland State
University's internal control over financial reporting and compliance.
October 15, 2014
3
CLEVELAND STATE UNIVERSITY
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)
Introduction
The following discussion and analysis provides an overview of the financial position and activities of
Cleveland State University (the “University”) as of and for the year ended June 30, 2014. This discussion
has been prepared by management and should be read in conjunction with the financial statements and the
notes thereto, which follow this section.
The University was established in 1964 by action of the Ohio General Assembly and is part of the State of
Ohio’s (the “State”) system of State-supported and State-assisted institutions of higher education. It is
one of the 13 State universities in Ohio. By statute, it is a body politic and corporate and an
instrumentality of the State. Located in the city of Cleveland, the University is an urban institution. A
majority of the University’s students commute daily from their homes in the Cleveland metropolitan area.
Using the Annual Financial Report
The University’s financial report includes financial statements prepared in accordance with Governmental
Accounting Standards Board (GASB) Statement No. 35, Basic Financial Statements - and Management’s
Discussion and Analysis - for Public Colleges and Universities. These principles require that financial
statements be presented on a consolidated basis to focus on the financial condition, the changes in
financial condition, and the cash flows of the University as a whole. Many other nonfinancial factors also
must be considered in assessing the overall health of the University, such as enrollment trends, student
retention, strength of the faculty, condition of the buildings, and the safety of the campus.
The financial statements prescribed by GASB Statement No. 35 (the Statement of Net Position, the
Statement of Revenue, Expenses and Changes in Net Position, and the Statement of Cash Flows) present
financial information in a form similar to that used by corporations. They are prepared under the accrual
basis of accounting, whereby revenue and assets are recognized when the service is provided and
expenses and liabilities are recognized when others provide the service, regardless of when cash is
exchanged.
Under the provisions of GASB Statement No. 61, Determining Whether Certain Organizations are
Component Units, the Cleveland State University Foundation, Inc. (the “Foundation”) and the Euclid
Avenue Development Corporation (the “Corporation”) are treated as component units of the University.
Accordingly, the Foundation and the Corporation are discretely presented in the University’s financial
statements. The Foundation and the Corporation are excluded from the management’s discussion and
analysis. Financial statements for the Foundation can be obtained from the Office of the Executive
Director at 2121 Euclid Avenue, Union Building Room 513, Cleveland, OH 44115-2214; financial
statements for the Corporation can be obtained from the Office of the Vice President for Business Affairs
and Finance at 2121 Euclid Avenue, Administration Center Room 210, Cleveland, OH 44115-2214.
4
Statement of Net Position
The statement of net position presents the financial position of the University at the end of the fiscal year
and includes all assets and liabilities. The difference between assets and liabilities– net position– is one
indicator of the current financial condition of the University, while the change in net position is an
indicator of whether the overall financial condition has improved or worsened during the year. Assets
and liabilities are generally measured using current values. One notable exception is capital assets, which
are stated at historical cost less an allowance for depreciation. A summary of the University’s assets,
liabilities, and net assets at June 30, 2014, 2013, and 2012 is as follows:
2014
Current assets
Noncurrent assets:
Capital assets, net
Other
Total assets
Current liabilities
Noncurrent liabilities
Total liabilities
Net position
$
73,380,256
2013
$
62,295,306
2012
$
58,779,879
473,007,276
168,486,591
714,874,123
470,807,959
165,143,422
698,246,687
477,359,925
89,523,254
625,663,058
46,493,301
275,713,014
322,206,315
48,069,690
282,499,014
330,568,704
50,253,020
219,093,396
269,346,416
$ 392,667,808
$ 367,677,983
$ 356,316,642
Current assets consist primarily of cash, operating investments, accounts and notes receivable, prepaid
expenses, and inventories. Current liabilities consist primarily of accounts payable, accrued payroll and
other liabilities, unearned revenue, and the current portion of long-term debt.
Current assets increased in 2014 from 2013, primarily due to an increase in accounts receivable caused by
the timing of a payment on a grant.
Current assets increased in 2013 from 2012, primarily due to an increase in cash and cash equivalents.
Net capital assets increased in 2014 from 2013 by $2.2 million, or 0.5% and decreased in 2013 from 2012
by $6.6 million, or 1.4%. The increase in 2014 was primarily due to construction of the CIHP building.
The decrease in 2013 was primarily due to demolition of buildings on campus.
Other assets increased in 2014 from 2013 by $3.3 million, or 2.0%. The increase was primarily due to
investment return.
Other assets increased in 2013 from 2012 by $75.6 million, or 84.5%. The increase was due primarily to
the Series 2012 bond issuance increasing restricted investments.
Liabilities decreased in 2014 from 2013 by $8.3 million, or 2.5% primarily due to a timing difference in
accounts payable and payments on outstanding bonds. Liabilities increased in 2013 from 2012 by $61.2
million, or 22.7%, primarily due to the Series 2012 bond issuance.
5
Capital and Debt Activities
One critical factor affecting the quality of the University’s programs is the development and renewal of its
capital assets. Capital additions totaled $31.2 million in 2014, $22.3 million in 2013, and $22.7 million in
2012. Capital retirements totaled $5.3 million in 2014, $14.5 million in 2013, and $16.9 million in 2012.
Capital additions and retirements for 2014, 2013 and 2012 exclude transfers from construction in progress
to buildings in the amount of $5.3 million in 2014, there were no transfers from construction in progress
to buildings in 2013 and 2012. Capital additions include construction of new facilities, repair and
renovation of existing facilities, and acquisition of equipment and library books. Capital asset additions
are funded, in part, by capital appropriations from the State. These appropriations amounted to $0.24
million in 2014, $0.34 million in 2013, and $3.2 million in 2012.
During August 2012, the University issued Series 2012 General Receipts Bonds in the amount of $152
million. Included in this issuance was $45 million of funding for a planned new facility on campus to
advance the University’s growing role in health sciences and expand its alliance with Northeast Ohio
Medical University (NEOMED). The University demolished a vacant dormitory and will replace it with a
health and life sciences building. Construction began in November 2013 with a June 2015 estimated
completion.
In September 2011, the University issued taxable general receipts bonds in the principal amount of $5.77
million. The General Receipts Series 2011 Bonds were issued as fixed rate bonds with monthly
maturities beginning October 1, 2013 through April 1, 2042. Interest is payable monthly at the annual
rate of 5.32%. The proceeds of the bonds will be used to finance a portion of the costs of public
improvements identified as the North Campus Neighborhood - Project Phase I. This phase is the subject
of a "project development agreement" dated July 14, 2011 by and between Cleveland State University and
CSU Housing, LLC, an Ohio limited liability company which serves as the project developer, but is not
affiliated with Cleveland State University.
In August 2009, the University entered into a capital lease with the Corporation in the amount of $14.5
million. The lease covers a parking garage that was constructed by the Corporation on the University’s
campus. The lease requires the University to operate and maintain the garage, and to make periodic
payments to the Corporation equal to its required debt service payments.
In August 2010, the University entered into a capital lease with the Corporation in the amount of $7.07
million. The lease covers a parking garage that was constructed by the Corporation on the University’s
campus. The lease requires the University to operate and maintain the garage, and to make payments to
the Corporation equal to its required debt service payments.
In March 2009, the University entered into a capital lease, financed by PNC Bank, in the amount of $42.8
million. Proceeds were used to fund a variety of energy conservation projects on the University’s
campus.
6
Net Position
Net position represents the residual interest in the University’s assets after liabilities are deducted. The
University’s net position at June 30, 2014, 2013, and 2012 are summarized as follows:
2014
Net investment in capital assets *
Restricted - expendable
Restricted - nonexpendable
Unrestricted
Total net position
$ 254,046,991
26,577,260
1,496,842
110,546,715
$ 392,667,808
2013
$ 252,363,981
18,216,207
1,316,540
95,781,255
$ 367,677,983
2012
$ 249,128,869
19,717,693
1,200,914
86,269,166
$ 356,316,642
Net investment in capital assets represents the University’s capital assets net of accumulated depreciation
and outstanding principal balances of debt attributable to the acquisition, construction, or improvement of
those assets. Changes in this category of net position are due to the net effect of additions to, disposals of,
and depreciation on capital assets.
Restricted expendable net position is subject to externally imposed restrictions governing their use.
Changes in this category are due to the timing of revenue and expenses in funds provided by donors and
grantors. Restricted nonexpendable net position consists primarily of endowment funds held by the
University. Changes in this category are driven primarily by investment performance, which was positive
in both 2014 and 2013.
Unrestricted net position is not subject to externally imposed stipulations. This category includes funds
functioning as endowment (quasi-endowment) of $6.1 million at June 30, 2014, $5.3 million at June 30,
2013 and June 30, 2012.
For the year ended June 30, 2014, the University had an increase in total net position of $25.0 million or
6.8%. Net investment in capital assets increased by $1.7 million, or 0.7%, because capital asset additions
exceeded deductions and depreciation expense. Unrestricted net position increased by $14.8 million, or
15.4%, due primarily to an increase in net tuition income (which went from $153.9 million in 2013 to
$160.0 million in 2014), an increase in gifts and grants of $4.0 million, an increase in State subsidy of
$3.0 million and an increase in investment return of $2.5 million in 2014.
For the year ended June 30, 2013, the University had an increase in total net position of $11.4 million, or
3.2%. Net investment in capital assets increased by $3.2 million, or 1.3%, because capital asset additions
exceeded deductions and depreciation expense. Unrestricted net position increased by $9.5 million, or
11%, due primarily to an increase in net tuition income (which went from $148.9 million in 2012 to
$153.9 million in 2013), along with an increase in investment return of $8.3 million in 2013.
7
Statement of Revenue, Expenses and Changes in Net Position
The Statement of Revenue, Expenses and Changes in Net Position presents the revenue earned and
expenses incurred during the year. Activities are reported as either operating or non-operating. As a
public institution, the University is dependent on State assistance. This dependency contributed toward
an operating deficit because the financial reporting model classifies State appropriations as non-operating
revenue. The utilization of capital assets is reflected in the financial statements as depreciation, which
amortizes the cost of an asset over its expected useful life. Summarized revenue, expenses, and changes
in net assets for the years ended June 30, 2014, June 30, 2013, and June 30, 2012 are as follows:
2014
Operating revenue:
Net student tuition and fees
Grants and contracts
Other
Total operating revenue
$
Operating expenses:
Educational and general
Auxiliary enterprises
Depreciation and amortization
Total operating expenses
159,789,368
25,420,702
31,691,848
216,901,918
2013*
$
242,678,174
32,448,832
26,657,857
301,784,863
Operating loss
(84,882,945)
153,869,978
21,451,164
32,203,400
207,524,542
2012*
$
148,869,484
22,516,862
27,360,842
198,747,188
237,975,625
31,594,198
26,550,715
296,120,538
226,748,245
29,152,533
24,280,541
280,181,319
(88,595,996)
(81,434,131)
Non-operating revenue, net of
interest:
State appropriations
Other
Gain before other changes
68,079,520
41,556,237
24,752,812
65,061,745
34,560,133
11,025,882
64,434,747
25,310,529
8,311,145
Other changes
Increase in net assets
237,013
24,989,825
335,459
11,361,341
3,179,823
11,490,968
367,677,983
392,667,808
356,316,642
367,677,983
345,354,036
356,316,642
Net position at beginning of year
Net position at end of year
$
$
$
*Restated per implementation of GASB 65
Total revenue and other changes, net of interest on debt, in fiscal 2014, 2013 and 2012 were $334.7
million, $315.3 million, and $300.7 million, respectively. The most significant sources of 2014 operating
revenue for the University, as reflected in the Statement of Revenues, Expenses and Changes in Net
Position, were student tuition and fees of $159.8 million, grants and contracts of $25.4 million, and
auxiliary services of $23.5 million.
8
Revenue from tuition and fees (net of scholarship allowances) increased in 2014 from 2013 by $5.9
million, or 3.8%, due to an increase in tuition rates. Headcount enrollment increased by 1.2% while fulltime equivalent enrollment increased by 5.0% over the prior year. A tuition increase of 3.5% was
implemented in the Fall 2013.
Revenue from tuition and fees (net of scholarship allowances) increased in 2013 from 2012 by $5.0
million, or 3.4%, due to an increase in tuition rates. Headcount enrollment and full-time equivalent
enrollment were consistent with the prior year. A tuition increase of 3.5% was implemented in the Fall
2012.
Total expenses in 2014, 2013, and 2012 were $309.8 million, $304.0 million, and $289.2 million,
respectively. Operating expenses include the costs of instruction, research, public service, general
administration, utilities, libraries, and auxiliary services. Operating expenses also include depreciation
and amortization. Expenses increased by $5.8 million (1.9%) in 2014 and $14.8 million (5.1%) in 2013,
due to increases in salaries and benefits, equipment and maintenance costs and in 2013 an increase in
depreciation expense.
Sources of non-operating revenue include State appropriations of $68 million in 2014, $65.1 million in
2013, and $64.4 million in 2012; grants and contracts of $23.8 million in 2014, $25.7 million in 2013, and
$26.1 million in 2012; gifts of $13.8 million in 2014, $7.3 million in 2013, and $7.2 million in 2012; and
investment income of $11.9 million in 2014, $9.4 million in 2013, and $1.0 million in 2012.
Net non-operating revenue increased in 2014 from 2013 by $10 million, or 10.1%, due primarily to
fundraising efforts and favorable investment returns. Net non-operating revenue increased in 2013 from
2012 by $9.9 million, or 11.0%, due favorable investment returns.
Other changes consist primarily of State capital appropriations of $0.24 million in 2014, $0.34 million in
2013 and $3.2 million in 2012.
Statement of Cash Flows
The Statement of Cash Flows presents information related to cash inflows and outflows summarized by
operating, noncapital financing, capital financing and investing activities, and helps measure the ability to
meet financial obligations as they mature. A summary of the statement of cash flows for the years ended
June 30, 2014, June 30, 2013 and June 30, 2012 is as follows:
2014
Net cash (used in) provided by:
Operating activities
Noncapital financing activities
Capital financing activities
Investing activities
Net increase (decrease) in cash
$ (69,740,071)
105,931,037
(43,310,078)
(10,868,327)
(17,987,439)
Cash at beginning of year
Cash at end of year
$
28,241,181
10,253,742
9
2013
$ (55,626,624)
97,819,682
30,220,541
(66,570,252)
5,843,347
$
22,397,834
28,241,181
2012
$ (69,179,077)
97,466,051
(31,178,524)
(2,097,525)
(4,989,075)
$
27,386,909
22,397,834
Major sources of cash included student tuition and fees of $158.7 million in 2014, $152.7 million in 2013,
and $148.1 million in 2012; State appropriations of $68.1 million in 2014, $65.1 million in 2013, and
$64.4 million in 2012; grants and contracts (operating and noncapital) of $40.7 million in 2014, $50.6
million in 2013, and $38.2 million in 2012; and auxiliary activities of $24.1 million in 2014, $21.8
million in 2013, and $21.5 million in 2012.
The largest payments were for employee compensation and benefits totaling $169.4 million in 2014,
$161.4 million in 2013, and $166.9 million in 2012; suppliers of goods and services totaling $107.8
million in 2014, $104.0 million in 2013, and $88.6 million in 2012; and purchases of capital assets
totaling $29.1 million in 2014, $19.7 million in 2013, and $20.2 million in 2012.
The change in cash flows from 2014 to 2013 is primarily due to the University’s decision to move more
of its cash from the bank to short-term investment vehicles. The rate of return available at other financial
institutions was higher than that provided by its operating bank. The change in cash flows from 2012 to
2013 is primarily due to the Series 2012 bond issuance and investment of the proceeds.
Credit Rating
The University’s bonds are rated “A+” stable by Standard & Poor’s, with the most recent rating published
on December 16, 2013. An “A” rating indicates a strong capacity to meet financial commitments, but
somewhat susceptible to adverse economic conditions and changes in circumstances. This rating is
consistent with the years ended June 30, 2012 and 2011. The highest achievable rating is “AAA.” The
University’s capacity to meet its financial obligations is considered strong. The University’s bonds are
rated “A1” by Moody’s Investors Service, with the most recent rating published on July 26, 2012.
Obligations rated “A” by Moody’s are judged to be upper-medium grade and are subject to low credit
risk. The highest achievable rating is “AAA”.
10
Looking Ahead
The primary challenges facing Ohio public institutions of higher learning, including Cleveland State
University (CSU), continue to be (1) maintaining the quality of academic instruction, (2) preserving
enrollment and assisting students in degree completion, (3) growing revenue, and (4) controlling costs.
There have been changes in the State of Ohio’s higher education funding model which place more
emphasis on outcome-based metrics such as degree completion and course completion, as opposed to
simply the number of students enrolled.
In the State of Ohio’s fiscal year 2015 budget, CSU is
expecting an allocation of $69.8 million in State Share of Instruction (SSI) funding, compared to the
$68.8 million received in fiscal year 2014. This increase is partially due to the state legislature
appropriating more funding in the FY 2014-FY 2015 biennial budget for higher education, which is then
allocated by way of the Ohio Board of Regent’s funding model. The SSI is the major state funding
source for state colleges and universities. Revenue from student instructional fee tuition is budgeted at
$152.9 million in fiscal year 2015, compared to fiscal year 2014’s result of $159.8 million. The
University enacted a 2.0% increase in undergraduate and graduate tuition, and an increase in law tuition
of 4.5% in fiscal year 2015, effective with the Fall 2014 semester. Along with the tuition increase, the
University has implemented a plan for qualifying undergraduate students to recoup the 2% increase in
tuition by showing progress toward a degree while remaining in academic good standing. The program,
known as the Graduation Incentive Plan, commenced in Fall 2013, but will not require funding by the
University until fiscal year 2015 (Fall 2014). Fiscal year 2015 tuition revenue is expected to be
approximately 0.4-0.5% below the budget plan due to a decline in enrollment. Preliminary Fall 2014
credit hour enrollment is approximately 3.8% lower than the budget plan, leading to lower than planned
tuition revenue. Although there is likely to be the normal Fall-to-Spring semester attrition in enrollment,
Spring 2015 tuition revenue is expected to match the reduced budget plan. In the FY 2015 budget, the
University planned for a decline in enrollment due to the conversion of undergraduate classes from a
dominant 4-credit-hour model to a 3-credit-hour model. The conversion has progressed according to plan,
and the lower than planned revenue is primarily due to other student demographic causes. As in prior
years, the ability of the University to fulfill its mission and execute its strategic plan continues to be
dependent upon student enrollment and tuition revenue.
In order to improve recruitment and retention, the University continues to make progress through its
comprehensive student success plan implemented two years ago. Recent tactics to achieve increased
enrollment and retention include: new technology systems and staff; reorganization of recruitment
territories; re-engineering of campus visitation programs, including a new welcome center; aggressive
advising and counseling of students; improvements in course scheduling and curriculum planning; and
downtown campus improvements.
The University is also affected by decisions at the state level regarding capital funding through the
biennial capital appropriations bill. The funds pay for campus renovation and maintenance of existing
facilities. The State did not provide any capital funding for the capital cycle FY12-FY13. The University
received $12.8 million from the FY13-FY14 state capital appropriations budget. On September 27, 2013,
it was announced that the State intended to fund a capital appropriations bill for the FY15-FY16 cycle,
whereby state universities can expect to share in a $400+ million appropriation. Cleveland State has
received an allocation of $14.6 million. The capital funding is being used for the University’s renovation
of its Main Classroom Building, the creation of engaged learning laboratories in the STEM disciplines,
and the development of a Center for Research and Innovation.
11
During the Summer of 2012, the University issued Series 2012 General Receipts Bonds in the amount of
$152 million. Included in this issuance was $45 million of funding for a planned new facility on campus
to advance the University’s growing role in health sciences and expand its alliance with Northeast Ohio
Medical University (NEOMED). The University demolished a vacant dormitory and is replacing it with a
health and life sciences building. Construction began in November 2013 with a June 2015 estimated
completion. In June 2014, the Cleveland State Board of Trustees authorized an addition $2.75 million in
the project’s budget which will be funded by University Reserve funds. The total project is expected to
cost $47.8 million.
The University continues to face significant cost pressures in the future. The University has taken
measures to address ongoing operating cost challenges, such as attracting and retaining high quality
faculty and staff; increased costs of employee benefits; and energy costs. The University began contract
negotiations in Fall 2014 with its largest bargaining unit, the American Association of University
Professors (AAUP). In addition, negotiations with two other major bargaining units – Service Employees
International Union (SEIU), and the Communications Workers of America (CWA) began during the
Summer of 2014. It is expected that these contract extensions will be negotiated for three years.
The University is in the practice of monitoring its student enrollment, other revenue sources, fee structure,
and operating expenditures of its units on a monthly basis. While predictions of a downturn in the number
of traditional high school graduates applying to universities are beginning to actualize, CSU’s
undergraduate enrollment for the near term is stable. The continual monitoring of the University’s
operations is meant to provide the administration with early signals and trends should changes in our
operating and financial plans be necessary.
12
Cleveland State University
Statement of Net Position
June 30, 2014 and 2013
2014
ASSETS
Current Assets:
Cash and Cash Equivalents
Investments (Note 2)
Accounts Receivable, Net (Note 3)
Notes Receivable, Net (Note 3)
Accrued Interest Receivable
Prepaid Expenses and Inventories
Total Current Assets
$
Noncurrent Assets:
Restricted Investments (Note 2)
Long-Term and Endowment Investments (Note 2)
Notes Receivable, Net (Note 3)
Capital Assets, Net (Note 5)
Total Noncurrent Assets
Total Assets
LIABILITIES
Current Liabilities:
Accounts Payable
Construction Accounts Payable
Accrued Liabilities
Accrued Interest Payable
Unearned Revenue
Compensated Absences - Current Portion (Note 6)
Obligations Under Capital Leases - Current Portion (Note 6)
Long-Term Debt - Current Portion (Note 6)
Total Current Liabilities
Noncurrent Liabilities:
Accrued Liabilities (Note 6)
Compensated Absences (Note 6)
Obligations Under Capital Leases (Note 6)
Long-Term Debt (Note 6)
Total Noncurrent Liabilities
Total Liabilities
NET POSITION
Net investment in Capital Assets
Restricted, Expendable
Restricted, Nonexpendable
Unrestricted
Total Net Position
$
10,253,742
21,150,882
39,067,355
1,594,607
25,712
1,287,958
73,380,256
$
28,241,181
1,526,916
30,003,582
1,375,002
1,148,625
62,295,306
65,181,283
92,261,429
11,043,879
473,007,276
641,493,867
73,907,760
80,872,803
10,362,859
470,807,959
635,951,381
714,874,123
698,246,687
6,209,494
2,979,340
11,476,567
1,337,357
9,640,938
977,258
7,395,409
6,476,938
46,493,301
10,036,373
1,868,183
11,447,761
1,426,268
9,446,138
1,249,872
6,278,157
6,316,938
48,069,690
13,312,182
8,051,187
55,245,066
199,104,579
275,713,014
13,108,405
7,371,167
56,442,924
205,576,518
282,499,014
322,206,315
330,568,704
254,046,991
26,577,260
1,496,842
110,546,715
252,363,981
18,216,207
1,316,540
95,781,255
392,667,808
The accompanying notes are an integral part of the financial statements.
13
2013
$
367,677,983
Cleveland State University
Statement of Revenues, Expenses, and Changes in Net Position
Years Ended June 30, 2014 and 2013
2014
Revenues
Operating Revenues:
Student Tuition and Fees
Less Scholarship Allowances
Net Student Tuition and Fees
Federal Grants and Contracts
State Grants and Contracts
Local Grants and Contracts
Private Grants and Contracts
Sales and Services
Auxiliary Enterprises
Other
Total Operating Revenues
$
182,056,611
22,267,243
159,789,368
8,770,261
11,577,824
822,171
4,250,446
7,069,797
23,450,596
1,171,455
216,901,918
2013
$
175,528,591
21,658,613
153,869,978
9,527,734
8,519,937
689,022
2,714,471
9,703,993
22,240,518
258,889
207,524,542
Expenses
Operating Expenses:
Instruction
Research
Public Service
Academic Support
Student Services
Institutional Support
Operation and Maintenance of Plant
Scholarships and Fellowships
Auxiliary Enterprises
Depreciation and Amortization
Total Operating Expenses
99,014,244
16,635,509
8,193,344
25,135,935
19,692,624
30,924,222
28,700,394
14,381,902
32,448,832
26,657,857
301,784,863
96,849,118
13,159,579
7,470,471
23,844,470
19,921,498
32,619,875
28,223,485
15,887,129
31,594,198
26,550,715
296,120,538
Operating Loss
(84,882,945)
(88,595,996)
68,079,520
22,422,637
1,413,312
13,841,028
11,850,709
(7,971,449)
109,635,757
65,061,745
22,186,001
3,533,938
7,306,397
9,395,509
(7,861,712)
99,621,878
24,752,812
11,025,882
237,013
24,989,825
335,459
11,361,341
367,677,983
392,667,808
358,304,898
(1,988,256)
356,316,642
367,677,983
Nonoperating Revenues (Expenses)
State Appropriations
Federal Grants and Contracts
State Grants and Contracts
Gifts
Investment Income
Interest on Debt
Net Nonoperating Revenues
Gain Before Other Changes
Other Changes
State Capital Appropriations
Increase in Net Position
Net Position
Net Position at Beginning of Year - as previously stated
Restatement (Note 1)
Net Position at Beginning of Year - as restated
Net Position at End of Year
$
The accompanying notes are an integral part of the financial statements.
14
$
Cleveland State University
Statement of Cash Flows
Years Ended June 30
2014
2013
Cash Flows from Operating Activities
Tuition and Fees
Grants and Contracts
Payments to or On Behalf of Employees
Payments to Vendors
Loans Issued to Students
Collection of Loans to Students
Auxiliary Enterprises Charges
Other Receipts
Net Cash Used by Operating Activities
$
Cash Flows from Noncapital Financing Activities
State Appropriations
Grants and Contracts
Gifts
Cash Provided by Stafford and PLUS Loans
Cash Used by Stafford and PLUS Loans
Cash Used by Agency Fund Activities
Cash Provided by Agency Fund Activities
Net Cash Provided by Noncapital Financing Activities
158,731,922
16,787,399
(169,436,612)
(107,806,381)
(2,936,539)
2,443,123
24,144,764
8,241,253
(69,831,071)
$
152,721,569
24,861,611
(161,363,523)
(103,981,417)
(2,491,744)
2,816,989
21,847,009
9,962,882
(55,626,624)
68,079,520
23,835,949
13,841,028
119,024,080
(119,000,000)
(294,865)
445,325
105,931,037
65,061,745
25,719,939
7,306,397
114,464,454
(114,484,939)
(262,817)
14,903
97,819,682
Cash Flows from Capital Financing Activities
Proceeds from Capital Debt and Leases
Capital Appropriations
Purchases of Capital Assets
Principal Paid on Capital Debt and Leases
Interest Paid on Capital Debt and Leases
Net Cash (Used) Provided by Capital Financing Activities
6,916,478
237,013
(29,094,187)
(13,309,022)
(8,060,360)
(43,310,078)
168,364,266
335,459
(19,652,273)
(108,806,852)
(10,020,059)
30,220,541
Cash Flows from Investing Activities
Proceeds from Sales and Maturities of Investments
Purchase of Investments
Interest on Investments
Net Cash Used by Investing Activities
1,526,103
(23,812,218)
11,417,788
(10,868,327)
4,526,103
(73,590,782)
2,494,427
(66,570,252)
Net (Decrease) Increase in Cash
Cash and Cash Equivalents at Beginning of Year
Cash and Cash Equivalents at End of Year
(18,078,439)
28,241,181
10,162,742
5,843,347
22,397,834
28,241,181
$
The accompanying notes are an integral part of the financial statements.
15
$
Cleveland State University
Statement of Cash Flows (continued)
Years Ended June 30
2014
2013
Reconciliation of Operating Loss to Cash Used by
Operating Activities
Operating Loss
Adjustments:
Depreciation and Amortization
Changes in Assets and Liabilities:
Accounts Receivable, Net
Notes Receivable, Net
Inventories
Prepaid Expenses and Deferred Charges
Accounts Payable
Accrued Liabilities
Deferred Revenue
Cash Used by Operating Activities
$
$
(84,882,945)
(88,595,996)
26,657,857
26,550,715
(8,826,759)
(493,416)
(243,215)
103,881
(2,989,344)
739,070
194,800
(69,740,071)
1,904,713
325,245
107,460
565,333
1,628,814
2,000,213
(113,121)
(55,626,624)
The accompanying notes are an integral part of the financial statements.
16
$
$
The Cleveland State University Foundation, Inc.
Statement of Financial Position
June 30, 2014 and 2013
2014
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable
Contributions receivable, net of allowance for
uncollectible contributions
Total Current Assets
$
Other assets:
Contributions receivable, net of allowance for
uncollectible accounts
Long-term investments
Funds held on behalf of others:
Cleveland State University
Cleveland State University Alumni Association
Total Other assets
Total Assets
LIABILITIES
Current Liabilities:
Accounts payable
Payable to Cleveland State University
Notes Payable
Annuities payable
Total Current Liabilities
803,418
729,457
6,439,771
7,726,172
4,728,917
6,261,792
9,150,662
71,901,510
6,749,055
61,865,366
8,383,471
471,713
89,907,356
2,884,353
402,313
71,901,087
97,633,528
$
78,162,879
$
52,208
2,580,949
39,996
39,146
2,712,299
$
44,628
2,206,072
39,996
33,376
2,324,072
Total Liabilities
NET ASSETS:
Unrestricted
Board designated - Scholarships
Total unrestricted
Temporarily restricted
Permanently restricted
Total Net Assets
$
564,755
122,785
604,751
90,088
8,383,471
471,713
2,884,353
402,313
12,255,023
6,305,577
(1,382,850)
203,878
(1,178,972)
36,080,894
50,476,583
85,378,505
(1,485,045)
181,180
(1,303,865)
30,045,079
43,116,088
71,857,302
97,633,528
The accompanying notes are an integral part of the financial statements.
17
$
$
Noncurrent Liabilities:
Notes Payable
Annuities payable
Funds held on behalf of others:
Cleveland State University
Cleveland State University Alumni Association
Total Liabilities and Net Assets
857,905
428,496
2013
$
78,162,879
Euclid Avenue Development Corporation
Statement of Financial Position
June 30, 2014 and 2013
2014
ASSETS
Current assets:
Cash and Cash Equivalents
Cash held by the University
Total Cash
Student accounts receivable, net
Other receivables
Current portion of leases receivable
Investments
Prepaid expenses
Total Current Assets
$
Property and equipment
Land
Building
Building improvements
Furniture, fixtures, and equipment
Construction in progress
Less: accumulated depreciation
Property and equipment, net
Other assets:
Restricted investments
Leases receivable, net of current portion
interest rate cap
Deferred bond isssuance costs, net of accumulated
amortization of $838,322 and $725,057 at
June 30, 2014 and 2013, respectively
Total other assets
Total assets
$
LIABILITIES
Current Liabilities:
Current portion of bonds payable
Current portion of notes payable
Accounts payable
Accrued interest
Accrued other
Deferred revenue
Security deposits
Total Current Liabilities
Noncurrent Liabilities:
Deferred revenue
Bonds payable, less current portion
Notes payable, less current portion
Total Noncurrent liabilities, net of current portion
Total Liabilities
NET ASSETS
Unrestricted
Total Liabilities and Net Assets
$
1,186,922
81,069
1,267,991
31,027
40,953
520,000
830,006
96,819
2,786,796
2013
$
1,146,460
70,448,479
334,891
3,157,020
7,515
75,094,365
(11,373,706)
63,720,659
1,146,460
70,448,479
229,111
3,062,411
74,886,461
(9,293,614)
65,592,847
22,046,456
20,340,000
2,290
18,147,546
20,860,000
39,436
2,733,261
45,122,007
2,846,526
41,893,508
111,629,462
$
110,771,403
1,655,000
60,000
537,403
725,652
37,669
161,901
159,438
3,337,063
1,505,000
60,000
487,989
815,362
40,080
142,204
186,003
3,236,638
1,238,773
101,000,000
1,441,180
103,679,953
1,276,309
102,655,000
1,501,180
105,432,489
107,017,016
108,669,127
4,612,446
2,102,276
111,629,462
$
The accompanying notes are an integral part of the financial statements.
18
1,630,468
844,361
2,474,829
55,402
226,844
505,000
22,973
3,285,048
110,771,403
The Cleveland State University Foundation, Inc.
Statement of Activities
Year Ended June 30, 2014 (with comparative totals for the year ended June 30, 2013)
Temporarily
Restricted
Unrestricted
Revenues
Contributions
Management fees related to
funds held on behalf of others
Endowment management fee
Net assets released from restrictions
Total revenues
$
$
11,630,482
30,412
519,267
14,330,514
15,031,590
Expenses
Program services:
Instructions
Research
Public service
Academic support
Financial aid
Institutional support
Auxilary enterprises
Total program services
Supporting services:
Management and general
Fund raising
Total supporting services
Total expenses
Gains/(Losses):
Investment gain, including realized
and unrealized losses, net
Provision for uncollectible
contributions
Total gains (losses)
Change in Net Assets
Reclassification of Net Assets
6,775,436
Total
2014
$
Total
2013
18,557,315
$
7,225,358
6,775,436
30,412
18,587,727
27,146
7,252,504
3,107,794
189,833
1,014,488
284,336
3,020,560
293,616
6,349,764
14,260,391
-
-
3,107,794
189,833
1,014,488
284,336
3,020,560
293,616
6,349,764
14,260,391
2,334,805
331,966
855,752
171,076
1,962,778
150,873
802,942
6,610,192
696,007
143,198
839,205
15,099,596
-
-
696,007
143,198
839,205
15,099,596
412,294
104,204
516,498
7,126,690
188,710
10,204,219
-
10,392,929
7,337,453
(920)
187,790
(178,892)
10,025,327
(359,857)
10,033,072
(145,824)
7,191,629
119,784
6,806,028
6,595,391
13,521,203
7,317,443
765,104
-
-
43,116,088
71,857,302
64,539,859
(1,178,972)
(180,045)
(180,045)
(770,213)
(1,303,865)
$
$
(519,267)
(14,330,514)
(3,219,299)
5,109
Net Assets - Beginning of Year, as restated
Net Assets - End of Year
151,397
Permanently
Restricted
30,045,079
$
36,080,894
$
50,476,583
$
The accompanying notes are an integral part of the financial statements.
19
85,378,505
$
71,857,302
Euclid Avenue Development Corporation
Statement of Activities
Years Ended June 30, 2014 and 2013
2014
Revenues
Rental Income:
Students
University
Other
Maintenance fee - University
Interest income
Other
Change in value of interest rate cap
Total revenues
$
8,493,599
944,468
100,000
252,964
139,605
484,667
(37,146)
10,378,157
2013
$
8,602,628
906,890
137,537
283,001
102,179
466,355
39,436
10,538,026
Expenses
Interest
Depreciation and Amortization
Utilities
Contract personnel
Management fees
Maintenance
General and administrative
Other operating
Marketing
Accounting
Reserve allowance
Insurance
Total expenses
2,152,209
2,193,356
991,093
1,429,553
328,239
453,042
150,323
92,596
35,819
18,221
14,747
8,789
7,867,987
2,567,217
2,337,775
961,833
1,422,135
322,529
594,363
205,430
276,226
48,294
25,799
49,575
8,135
8,819,311
Change in Net Assets
2,510,170
1,718,715
Net Assets - Beginning of Year
2,102,276
383,561
Net Assets - End of Year
$
4,612,446
The accompanying notes are an integral part of the financial statements.
20
$
2,102,276
CLEVELAND STATE UNIVERSITY
NOTES TO FINANCIAL STATEMENTS
Years Ended June 30, 2014 and 2013
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation
Cleveland State University (the “University”) was established by the General Assembly of the State of
Ohio (the “State”) in 1964 by statutory act under Chapter 3344 of the Ohio Revised Code. As such, the
University is a component unit of the State. The University is exempt from federal income taxes under
Section 115 of the Internal Revenue Code, except for unrelated business income.
In accordance with Governmental Accounting Standards Board (GASB) Statement No. 61, the
University’s financial statements are included, as a discretely presented component unit, in the State’s
Comprehensive Annual Financial Report.
The financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America, as prescribed by GASB Statement No. 35, Basic Financial Statements –
and Management’s Discussion and Analysis – for Public Colleges and Universities. GASB Statement
No. 35 establishes standards for external financial reporting for public colleges and universities and
requires that resources be classified for accounting and reporting purposes into the following net position
categories:

Net investment in capital assets: Capital assets, net of accumulated depreciation and
outstanding principal balances of debt attributable to the acquisition, construction or improvement
of those assets.

Restricted, Expendable: Net position whose use by the University is subject to externally
imposed stipulations that can be fulfilled by actions of the University pursuant to those
stipulations or that expire by the passage of time. Income generated from these funds may be
restricted for student scholarships, loans, instruction, research, and other specific University
needs.

Restricted, Nonexpendable: Net position subject to externally imposed stipulations that they be
maintained permanently by the University. Income generated from these funds may be restricted
for student scholarships, loans, instruction, research, and other specific University needs.

Unrestricted: Net position that is not subject to externally imposed stipulations. Unrestricted net
position may be designated for specific purposes by action of management or may otherwise be
limited by contractual agreements with outside parties.
The accompanying financial statements have been prepared on the accrual basis. The University reports
as a Business-Type Activity, as defined by GASB Statement No. 35. Business-Type Activities are those
that are financed in whole or in part by fees charged to external parties for goods or services.
21
Operating Activities
The University’s policy for defining operating activities as reported on the statement of revenue,
expenses, and changes in net position are those that result from exchange transactions such as payments
received for providing services and payments made for goods or services received. The University also
classifies as operating revenue grants classified as exchange transactions and auxiliary activities. Certain
significant revenue streams relied upon for operations are recorded as nonoperating revenue, including
State appropriations and investment income. Operating expenses include educational resources,
administrative expenses and depreciation on capital assets. Under the University’s decentralized
management structure, it is the responsibility of individual departments to determine whether to first
apply restricted or unrestricted resources when an expense is incurred for purposes for which both
restricted and unrestricted net assets are available. The principal operating revenue is student tuition and
fees. Student tuition and fees revenue are presented net of scholarships and fellowships applied to student
accounts.
Summary of Significant Accounting Policies
Cash and Cash Equivalents. The University considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Investments. Investments are recorded at fair value, as established by the major securities markets.
Purchases and sales of investments are accounted for on the trade date basis. Investment income is
recorded on the accrual basis. Realized and unrealized gains and losses are reported as investment
income. The University classifies all investments that mature in less than one year as current investments.
Endowment investments are subject to the restrictions of gift instruments, requiring principal to be
maintained in perpetuity with only the income from the investments available for expenditure. The
University may set aside other assets for the same purposes as endowment investments (quasiendowment); the University may expend the principal of quasi-endowment at any time.
Accounts Receivable Allowance. The allowance for bad debt is determined based on historical average
and a reasonableness ratio of accounts receivable to bad debt. The objective is to increase the
collectibility of current receivables to assist the University's objectives regarding enrollment and
retention. As such, the University enforces policies that prohibit registration with an unpaid balance over
$1,000 and limit registration for those students with a current unpaid balance between $200 - $1,000. The
federal regulations regarding returns of funding under the Federal student aid programs of Title IV of the
Higher Education Amendments of 1992 have increased outstanding accounts receivable.
Inventories. Inventories are reported at cost. Cost is determined on the average cost basis.
Capital Assets. Capital assets are stated at historical cost or at an appraised value at date of donation, if
acquired by gift. It is the University’s policy to capitalize equipment costing $5,000 or more and
buildings and improvements costing $100,000 or more. Depreciation of capital assets is provided on a
straight-line basis over the estimated useful lives (five to forty years) of the respective assets and is not
allocated to the functional expenditure categories. Amortization of the capitalized cost of assets held
under capital leases is generally computed using the straight-line method over the estimated useful lives
of the underlying assets or the term of the lease, whichever is shorter. The University capitalizes but does
not depreciate works of art or historical treasures that are held for exhibition, education, research and
public service.
22
Compensated Absences. Classified employees earn vacation at rates specified under State law. Fulltime administrators and twelve-month faculty earn vacation at a rate of 22 days per year. The maximum
amount of vacation that an employee can carry over from one fiscal year to the next is 30 days.
All University employees are entitled to a sick leave credit equal to 10 hours for each month of service
(earned on a pro rata basis for less than full-time employees). This sick leave will either be absorbed by
time off due to illness or injury or, within certain limitations, be paid to the employee upon retirement.
The amount paid to an employee, with 10 or more years of service upon retirement, is limited to onequarter of the accumulated sick leave up to a maximum of 240 hours.
The University has an accrued liability for all accumulated vacation hours, plus an estimate of the amount
of sick leave that will be paid upon retirement. Salary-related fringe benefits have also been accrued.
Unearned Revenue. Unearned revenue consists primarily of amounts received in advance of an event,
such as student tuition and fees, and advance ticket sales related to the next fiscal year.
Summer term tuition and fees and corresponding expenses relating to the portion of the term that is within
the current fiscal year are recognized as tuition revenue and operating expense. The portion of sessions
falling into the next fiscal year are recorded as unearned revenue and prepaid expense in the statement of
net position and will be recognized in the following fiscal year.
Perkins Loan Program. Funds provided by the United States government under the Federal Perkins
Loan program are loaned to qualified students and re-loaned after collection. These funds are ultimately
refundable to the government and, therefore, are recorded as a liability in the accompanying statement of
net position.
Classification of Revenue. Revenue is classified as either operating or nonoperating.
Operating revenue includes revenues from activities that have characteristics similar to exchange
transactions. These include student tuition and fees (net of scholarship discounts and allowances), sales
and services of auxiliary enterprises, and certain federal, state, local and private grants, and contracts. The
presumption is that there is a fair exchange of value between all parties to the transaction.
Non-operating revenue includes revenue from activities that have the characteristics of nonexchange
transactions, such as state appropriations, and certain federal, state, local and private gifts, and grants. The
implication is that such revenues are derived from more passive efforts related to the acquisition of the
revenue, rather than the earning of it.
Auxiliary Enterprises. Auxiliary enterprise revenue primarily represents revenue generated by parking,
Wolstein Center, food service, bookstore, recreation center, child care center and intercollegiate athletics.
Scholarship Allowances and Student Aid. Financial aid to students is reported in the statement of
revenue, expenses, and changes in net position under the alternative method as prescribed by the National
Association of College and University Business Officers (NACUBO). Certain aid such as loans, funds
provided to students as awarded by third parties, and Federal Direct Lending is accounted for as a thirdparty payment (credited to the student’s account as if the student made the payment). All other aid is
reflected in the financial statements as operating expenses, or scholarship allowances, which reduce
revenue. The amount reported as operating expense represents the portion of aid that was provided to the
student in the form of cash. Scholarship allowances represent the portion of aid provided to the student in
the form of reduced tuition. Under the alternative method followed by the University, scholarship
allowances are computed by allocating the cash payments to students, excluding payments for services, to
the ratio of aid not considered to be third-party aid to total aid.
23
Component Units. The Cleveland State University Foundation, Inc. (the Foundation) and the Euclid
Avenue Development Corporation (the Corporation) are private nonprofit organizations that report under
FASB standards, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue
recognition criteria and presentation features are different from GASB revenue recognition criteria and
presentation features. No modifications have been made to the Foundation’s or the Corporation’s
financial information included in the University’s financial report for these differences.
Use of Estimates. The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual
results may differ from those estimates.
Bond Issuance Costs. Bond issuance costs are expensed as incurred.
Change in Accounting Principle
Effective with the fiscal year ended June 30, 2013, the University adopted GASB Statement No. 63,
Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net
Position. This standard renames “net assets” as “net position” and provides financial reporting guidance
for deferred inflows and outflows of resources and defines those elements as consumption of net position
by the University that is applicable to a future reporting period, and an acquisition of net position by the
University that is applicable to a future reporting period, respectively.
In March 2012, the GASB issued GASB Statement No. 65, Items Previously Reported as Assets and
Liabilities. Statement No. 65 establishes accounting and financial reporting standards that reclassify, as
deferred outflows and inflows of resources, certain items that were previously reported as assets and
liabilities. This Statement also provides other financial reporting guidance related to the impact of the
financial statement elements deferred outflows of resources and deferred inflows of resources. In
accordance with the statement, effective with fiscal year ended June 30, 2014 the University adopted
GASB Statement No. 65 and has retroactively expensed unamortized bond issuance costs. The change in
accounting principle resulted in a prior period adjustment to Net Position at July 1, 2012 of $1,988,256.
In, addition, the June 30, 2013 Statement of Revenue, Expenses and Changes in Net Position reflects a
restatement and reduction of $605,079 in amortization expense in relation to the adoption of GASB 65.
Upcoming Accounting Pronouncements
Reporting for Pensions: In June 2012, the GASB issued Statement No. 68, Accounting and Financial
Reporting for Pensions. Statement No. 68 requires governments providing defined benefit pensions to
recognize their unfunded pension benefit obligation as a liability for the first time, and to more
comprehensively and comparably measure the annual costs of pension benefits. The statement also
enhances accountability and transparency through revised note disclosures and required supplemental
information (RSI). The University is currently evaluating the impact this standard will have on the
financial statements when adopted. The provisions of this statement are effective for financial statements
for the year ending June 30, 2015.
24
NOTE 2 – DEPOSITS AND INVESTMENTS
Deposits
Custodial credit risk is the risk that, in the event of the failure of a depository financial institution, the
University will not be able to recover deposits or will not be able to recover collateral securities that are in
the possession of an outside party. Protection of University cash and deposits is provided by the Federal
Deposit Insurance Corporation as well as qualified securities pledged by the institution holding the assets.
Under State law, financial institutions must collateralize all public deposits. The value of the pooled
collateral must equal at least 105 percent of public funds deposited. Collateral is held by trustees
including the Federal Reserve Bank and designated third-party trustees of the financial institution.
At June 30, 2014, the cash and cash equivalents balance of $10,253,742 is after the University recorded
an overdraft consisting of items in transit of $2,216,408 in accounts payable. The bank balance at June 30,
2014 was $9,046,064, of which $2,083,673 was covered by federal depository insurance, and $6,962,391
was covered by collateral held by the trust department of a bank other than the pledging bank in the name
of the pledging bank.
At June 30, 2013, the cash and cash equivalents balance of $28,241,181 is after the University recorded
an overdraft consisting of items in transit of $4,408,987 in accounts payable. The bank balance at June 30,
2013 was $27,985,796, of which $916,499 was covered by federal depository insurance, and $27,069,297
was covered by collateral held by the trust department of a bank other than the pledging bank in the name
of the pledging bank.
Investments
In accordance with the Board of Trustees’ resolution, the types of investments that may be purchased by
the University include United States Treasury securities, federal government agency securities,
certificates of deposit, bank repurchase agreements, commercial paper, bonds and other obligations of the
State of Ohio or any of its political subdivisions, the State Treasurer’s Asset Reserve (STAR Ohio),
bankers’ acceptances, money market funds, common stocks, and corporate bonds. The endowment
investments are managed by the Foundation, which can also invest in real estate and alternative
investments.
STAR Ohio is an investment pool managed by the Ohio State Treasurer’s office that allows governments
within the State to pool their funds for investment purposes. STAR Ohio is not registered with the
Securities and Exchange Commission as an investment company, but does operate in a manner consistent
with Rule 2A7 of the Investment Company Act of 1940. The investment is valued at STAR Ohio’s share
price, which represents fair market value, on June 30, 2014 and 2013.
Restricted investments consist of unspent debt proceeds.
25
As of June 30, 2014, the University had the following types of investments and maturities:
Investment Type
US Agencies
$
Commercial Paper
U.S. obligation mutual fund
Certificates of Deposit
STAR Ohio
Bond mutual funds
Stock mutual funds
Total
$
Fair
Value
17,406,431
44,774,580
37,897,530
19,140,000
10,056
25,105,344
34,259,653
178,593,594
Investment Maturities (in Years)
Less
Than 1
1-5
15,542,621
$
1,863,810
44,774,580
37,897,530
19,140,000
25,105,344
117,354,731
$
26,969,154
$
$
As of June 30, 2013, the University had the following types of investments and maturities:
Investment Type
U.S. Agencies
Commercial Paper
U.S. obligation mutual fund
Certificates of deposit
STAR Ohio
Bond mutual funds
Stock mutual funds
Total
$
$
Fair
Value
60,154,151
13,753,604
33,700,152
1,526,103
814
19,423,827
27,748,828
156,307,479
$
$
Investment Maturities (in Years)
Less
Than 1
1-5
40,630,960
$
19,523,191
13,753,604
33,700,152
1,526,103
19,423,827
89,610,819
$
38,947,018
Some of the U.S. agency securities are callable at various dates. The University believes that no
securities will be called.
Interest Rate Risk. Interest rate risk is the risk that changes in interest rates will adversely affect the fair
value of an investment. Investments with interest rates that are fixed for longer periods are likely to be
subject to more variability in their fair values as a result of future changes in interest rates.
Credit Risk. Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its
obligations. While the University’s bond mutual fund investment itself is not rated, the credit quality of
the fund’s holdings is AA or better, as rated by Standard & Poor’s and Moody’s.
Custodial Credit Risk. Custodial credit risk is the risk that, in the event of the failure of a counterparty
to a transaction, the University will not be able to recover the value of investment securities that are in the
possession of an outside party. The University does not have a policy for custodial credit risk. At June
30, 2014 and 2013, none of the investment securities were uninsured and unregistered, with securities
held by the counterparty or by its trust department or agent but not in the University's name.
26
Concentration of Credit Risk. Concentration of credit risk is the risk of loss attributed to the magnitude
of investment in a single issuer. As of June 30, 2014 and 2013, not more than 5% of the University’s
total investments were invested in any one issuer except those which are obligations of, or fully
guaranteed as to both principal and interest by, the U.S. Government or its agencies.
Foreign Currency Risk. Foreign currency risk is the risk that changes in exchange rates will adversely
affect the fair value of an investment. At June 30, 2014 and 2013, investments include approximately
$17.1 million and $6.1 million, respectively, managed by international equity managers that are subject to
foreign currency risk. Although the University’s investment policy does not specifically address foreign
currency risk, it does limit foreign investments to no more than 20% of the portfolio.
NOTE 3 – RECEIVABLES
The composition of accounts receivable at June 30, 2014 and 2013 is summarized as follows:
Student accounts
Grants
State Capital
Other
Total Accounts Receivable
Less allowance for uncollectible accounts
Accounts Receivable - Net
$
2014
16,806,123
23,564,594
336,511
2,922,297
43,629,525
4,562,170
39,067,355
2013
$ 14,656,435
15,022,291
99,498
4,481,646
34,259,870
4,256,288
$ 30,003,582
Notes receivable consist primarily of loans to students under the federal Perkins Loan Program. The
composition of notes receivable at June 30, 2014 and 2013 is summarized as follows:
Perkins Loan Program
Other
Total Notes Receivable
Less allowance for uncollectible accounts
Notes Receivable - Net
Less Current Portion
Total Noncurrent Notes Receivable
$
2014
12,900,957
623,452
13,524,409
885,923
12,638,486
1,594,607
11,043,879
27
2013
$ 11,923,116
637,514
12,560,630
822,769
11,737,861
1,375,002
$ 10,362,859
NOTE 4 – STATE SUPPORT
The University is a State-assisted institution of higher education, which receives a student-based subsidy
from the State. This subsidy is determined annually, based upon a formula devised by the Ohio Board of
Regents.
In addition, the State provides the funding and constructs major plant facilities on the University’s
campus. The funding is obtained from the issuance of revenue bonds by the Ohio Public Facilities
Commission (OPFC), which in turn causes the construction and subsequent lease of the facility, by the
Ohio Board of Regents. Upon completion, the Board of Regents turns over control of the facility to the
University. Neither the obligation for the revenue bonds issued by OPFC nor the annual debt service
charges for principal and interest on the bonds are reflected in the University’s financial statements. The
OPFC revenue bonds are currently being funded through appropriations to the Board of Regents by the
General Assembly.
The facilities are not pledged as collateral for the revenue bonds. Instead, the bonds are supported by a
pledge of monies in the Higher Education Bond Service Fund established in the custody of the Treasurer
of State. If sufficient monies are not available from this fund, a pledge exists to assess a special student
fee uniformly applicable to students in State-assisted institutions of higher education throughout the State.
NOTE 5 – CAPITAL ASSETS
Capital assets activity for the years ended June 30, 2014 and 2013 is summarized as follows:
2014
Beginning
Balance
Capital Assets:
Non-depreciable:
Land
Construction in Progress
Capitalized Collections
Depreciable:
Land Improvements
Buildings
Equipment
Library Books
Intangible Assets
Total Capital Assets
$
Less Accumulated Depreciation:
Land Improvements
Buildings
Equipment
Library Books
Intangible Assets
Total Accumulated Depreciation
Capital Assets, Net
$
55,817,124
7,998,492
7,102,155
Additions/
Transfers
$
617,900
18,777,470
-
2014
Ending
Balance
Retirements/
Transfers
$
5,335,421
-
$
56,435,024
21,440,541
7,102,155
24,279,616
631,074,801
45,172,425
70,805,713
483,059
842,733,385
6,102,803
9,355,983
1,673,474
36,527,630
3,335,000
786,009
1,185,825
10,642,255
24,279,616
633,842,604
53,742,399
71,293,362
483,059
868,618,759
14,231,674
267,765,929
29,210,475
60,451,665
265,683
371,925,426
1,051,927
17,506,046
4,246,707
3,189,761
48,306
26,042,746
384,853
786,009
1,185,826
2,356,688
15,283,602
284,887,121
32,671,172
62,455,600
313,989
395,611,484
470,807,959
$
28
10,484,884
$
8,285,567
$
473,007,276
2013
Beginning
Balance
Capital Assets:
Non-depreciable:
Land
Construction in Progress
Capitalized Collections
Depreciable:
Land Improvements
Buildings
Equipment
Library Books
Intangible Assets
Total Capital Assets
$
55,817,124
3,214,643
7,102,155
Less Accumulated Depreciation:
Land Improvements
Buildings
Equipment
Library Books
Intangible Assets
Total Accumulated Depreciation
Capital Assets, Net
Additions/
Transfers
$
$
4,783,849
-
2013
Ending
Balance
Retirements/
Transfers
$
-
$
55,817,124
7,998,492
7,102,155
24,075,287
627,645,616
45,603,192
70,913,142
483,059
834,854,218
204,329
10,356,075
5,152,238
1,840,398
22,336,889
6,926,890
5,583,005
1,947,827
14,457,722
24,279,616
631,074,800
45,172,425
70,805,713
483,059
842,733,384
13,177,457
254,655,215
31,236,353
58,207,891
217,377
357,494,293
1,054,217
17,728,830
3,557,127
4,191,601
48,306
26,580,081
4,618,116
5,583,005
1,947,827
12,148,948
14,231,674
267,765,929
29,210,475
60,451,665
265,683
371,925,426
477,359,925
$
(4,243,192)
$
2,308,774
$
470,807,959
NOTE 6 – NONCURRENT LIABILITIES
Noncurrent liabilities consist of the following as of June 30, 2014 and June 30, 2013:
Due
Date s
2014
Be ginning
Balance
Inte re st
Rate -%
2004 Bonds Payable
2014
2007A Bonds Payable
2010-36 4.00-5.75
2.25-5.25
$
2007A Bond Premium
Additions
1,860,000 $
2014
Ending
Balance
Re ductions
- $
1,860,000 $
Curre nt
- $
38,760,000
-
935,000
37,825,000
1,060,410
-
44,493
1,015,917
990,000
44,493
2011 Bonds Payable
2013-42 5.32
5,775,000
-
85,000
5,690,000
120,000
2012 Bonds Payable
2013-37 5.00
149,540,000
-
2,760,000
146,780,000
4,695,000
14,898,045
-
627,445
14,270,600
627,445
62,721,081
6,916,478
6,997,084
62,640,475
7,395,409
274,614,536
6,916,478
13,309,022
268,221,992
13,872,347
11,799,101
326,939
12,126,040
-
1,309,304
3,754,448
1,186,142
-
2012 Bond Premium
Capital Leases
2010-41 2.33-5.08
T otal Debt
Perkins Student Loans
Deposits
Compensated Absences
Less Current Portion long-term liabilities
Long-T erm Liabilities
8,621,039
296,343,980 $
$
(13,844,966)
282,499,014
407,406
11,405,271 $
3,877,610
17,186,632
9,028,445
977,258
290,562,619 $ 14,849,605
(14,849,605)
$ 275,713,014
29
Due
Date s
2003A Bonds Payable
2013
Be ginning
Balance
Inte re st
Rate -%
2.5-5.25
$
2003A Bond Premium
2004 Bonds Payable
Re ductions
- $
25,495,000 $
Curre nt
- $
-
529,977
-
529,977
-
-
2014 2.25-5.25
52,340,000
-
50,480,000
1,860,000
1,860,000
1,014,262
-
1,014,262
-
-
2010-36 4.00-5.75
39,650,000
-
890,000
38,760,000
935,000
1,104,903
-
44,493
1,060,410
44,492
3.00-4.75
19,495,000
-
19,495,000
-
-
2004 Bonds Premium
2007A Bonds Payable
Additions
25,495,000 $
2013
Ending
Balance
2007A Bond Premium
2008 Bonds Payable
2011 Bonds Payable
2013-42 5.32
5,775,000
-
-
5,775,000
90,000
2012 Bonds Payable
2013-37 5.00
-
152,835,000
3,295,000
149,540,000
2,760,000
-
15,529,266
631,221
14,898,045
627,445
6,931,899
62,721,081
6,278,157
2012 Bond Premium
Capital Leases
2010-41 2.33-5.08
69,652,980
T otal Debt
Perkins Student Loans
Deposits
Compensated Absences
Less Current Portion long-term liabilities
Long-T erm Liabilities
215,057,122
168,364,266
108,806,852
274,614,536
12,595,094
11,512,223
286,878
-
11,799,101
-
1,480,281
-
170,977
1,309,304
-
9,010,012
237,059,638 $ 168,651,144 $
$
(17,966,242)
219,093,396
388,973
109,366,802
8,621,039
1,249,872
296,343,980 $ 13,844,966
(13,844,966)
$ 282,499,014
On August 21, 2012, the University issued general receipts bonds in the principal amount of
$152,835,000. The General Receipts Series 2012 Bonds were issued as fixed rate bonds with monthly
maturities beginning June 1, 2013 through June 1, 2037. Interest is payable monthly at the rate of 5.0%.
The proceeds of the bonds were used to (1) pay costs of constructing a new building on the University’s
campus, rehabilitation of existing buildings, campus-wide upgrades of electrical, mechanical and security
systems and improvements to campus walkways; (2) refund portions of the Outstanding Series 2003A
Bonds, Series 2004 Bonds and Series 2008 Bonds; and (3) pay costs relating to the issuance of the Series
2012 Bonds.
In September 2011, the University issued taxable general receipts bonds in the principal amount of
$5,775,000. The General Receipts Series 2011 Bonds were issued as fixed rate bonds with monthly
maturities beginning October 1, 2013 through April 1, 2042. Interest is payable monthly at the rate of
5.32%. The proceeds of the bonds were used to finance a portion of the costs of public improvements
identified as the North Campus Neighborhood – Project Phase I. This phase is the subject of a "project
development agreement" dated July 14, 2011 by and between Cleveland State University and CSU
Housing, LLC, an Ohio limited liability company which serves as the project developer.
In May 2008, the University issued general receipts bonds in the amount of $20,910,000. The General
Receipts Series 2008 Bonds were issued as fixed rate bonds maturing in 2013, 2033 and 2036. The
proceeds of the bonds were used to refinance the 2003B and 2007B Bonds. The bonds have various call
provisions. This bond was called and refinanced in August 2012, using the proceeds of the General
Receipts Series 2012 Bonds.
During the year ended June 30, 2007, the University issued Series 2007A general receipts bonds. The
Series 2007A general receipts bonds were issued for $42,110,000, bear interest rates between 4% and
5.75%, and mature in 2036. Proceeds were used to fund the construction of a new Student Center.
30
In August 2004, the University issued general receipts bonds in the amount of $62,000,000. The General
Receipts Series 2004 Bonds were issued as fixed rate bonds with serial maturities through 2008 and term
bonds maturing in 2014, 2019, 2024, 2029, and 2034. The proceeds of the bonds were used to pay the
cost of a variety of projects, including construction of a student center, parking facilities and a bookstore,
renovations to a portion of Fenn Tower, and landscaping and other permanent site improvements to the
main plaza. This bond was called and refinanced in August 2012, using the proceeds of the General
Receipts Series 2012 Bonds.
In June 2003, the University issued Series 2003A and 2003B (Series 2003) general receipts bonds. The
Series 2003A general receipts bonds were issued for $35,745,000, bear interest rates between 2.5% and
5.25%, and mature in 2033. Proceeds were used to refund outstanding Series 1993 general receipts
bonds, rehabilitate the Howe Mansion and construct an Administrative Center. This bond was called and
refinanced in August 2012, using the proceeds of the General Receipts Series 2012 Bonds.
Interest expense on indebtedness for the years ended June 30, 2014 and 2013 was $7,971,449 and
$7,861,712, respectively. On construction-related debt, for the years ended June 30, 2014 and 2013,
interest cost was capitalized in the amount of $2,887,227 (net of $191,910 interest income) and
$2,885,402 (net of $20,372 of interest income), respectively.
The University leases various pieces of equipment which have been recorded under various capital leases
in amounts representing the present value of future minimum lease payments. Capital lease obligations
are collateralized by equipment with an aggregate net book value at June 30, 2014 and 2013 of
$7,745,329 and $6,562,878, respectively. The capital leases have varying maturity dates through 2041.
Principal and interest payable for the next five years and in subsequent five-year increments are as
follows:
2015
2016
2017
2018
2019
2020-2024
2025-2029
2030-2034
2035-2039
2040-2043
Bonds Payable
Capital Leases
Principal
Interest
Principal
Interest
$
5,805,000 $
9,246,763 $
7,395,409 $ 2,101,249
6,050,000
8,995,654
7,578,916
2,071,949
6,290,000
8,741,621
7,547,707
1,810,898
6,545,000
8,477,486
7,785,730
1,547,449
6,880,000
8,149,853
6,058,802
1,282,290
35,655,000
35,717,785
11,193,911
3,203,561
45,315,000
26,102,738
3,510,000
1,896,806
55,715,000
13,648,785
4,060,000
1,395,416
21,015,000
2,253,517
4,730,000
802,970
1,025,000
79,135
2,780,000
192,451
$ 190,295,000 $ 121,413,337 $ 62,640,475 $ 16,305,039
The University has entered into various lease agreements for office equipment, and office and classroom
space, which are considered operating leases. The University has leased space in the Fenn Tower
building from the Corporation, which it uses for classrooms and meeting rooms. Total rental expense
under operating leases during the years ended June 30, 2014 and 2013 amounted to $3,747,760 and
$3,544,063, respectively. The operating leases have varying maturity dates through 2042.
31
Future minimum operating lease payments as of June 30, 2014 are as follows:
Year Ending June 30
2015
2016
2017
2018
2019
2020-2024
2025-2029
2030-2034
2035-2039
2040-2042
Operating
Leases
$ 3,485,405
3,480,405
3,331,095
3,128,384
47,541,517
3,778,420
3,778,420
3,774,120
2,480,194
971,227
$ 75,749,187
NOTE 7 – EMPLOYMENT BENEFIT PLANS
Retirement Plans
Substantially all nonstudent University employees are covered by one of three retirement plans. The
university faculty are covered by the State Teachers Retirement System of Ohio (STRS). Nonfaculty
employees are covered by the Ohio Public Employees Retirement System (OPERS). Employees may opt out
of STRS and OPERS and participate in the Alternative Retirement Plan (ARP).
STRS and OPERS both offer three separate retirement plans: the defined benefit plan, the defined
contribution plan, and a combined plan.
Defined Benefit Plans
STRS is a statewide retirement plan for certified teachers. STRS provides retirement and disability benefits,
annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Benefits are
established by State statute. Contribution rates are established by the State Teachers Retirement Board, not to
exceed the statutory maximum rates of 10% for employees and 14% for employers. Currently, employees
contribute 10% of covered payroll and employers contribute 14% of covered payroll. The University's
contributions to STRS for the years ended June 30, 2014, 2013 and 2012 were $7,812,496, $7,035,848 and
$6,826,392, respectively, equal to the required contributions for each year. STRS issues a stand-alone
financial report. The report may be obtained by writing to STRS Ohio, 275 East Broad Street, Columbus,
OH 43215-3771, by calling 1-888-227-7877, or by visiting the STRS Ohio Web site at www.strsoh.org.
32
OPERS is a statewide retirement plan which covers nonteaching University employees. OPERS provides
retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and
beneficiaries. Benefits are established by State statute. Contribution rates are established by the Ohio Public
Employee Retirement Board, not to exceed the statutory maximum rates of 10% for employees and 14% for
employers. Currently, employees contribute 10% of covered payroll and employers contribute 14% of
covered payroll. The University's contributions to OPERS for the years ended June 30, 2014, 2013 and 2012
were $7,622,811, $7,014,063 and $7,151,384, respectively, equal to the required contributions for each year.
OPERS issues a stand-alone financial report. The report may be obtained by visiting
www.opers.org/investments/cafr.shtml, writing to OPERS, 277 East Town Street, Columbus, OH 432154642, or by calling (614) 222-5601 or 800-222-7377.
Defined Contribution Plan
The University also offers eligible employees an alternative retirement program. The University is required
to contribute to STRS 3.50% of earned compensation for those employees participating in the alternative
retirement program. The University’s contributions for the years ended June 30, 2014 and 2013 were
$546,676 and $389,754, respectively, which equal 3.5% of earned compensation.
STRS also offers a defined contribution plan in addition to its long-established defined benefit plan. All
employee contributions and employer contributions at a rate of 10.5% are placed in an investment account
directed by the employee. Disability benefits are limited to the employee’s account balance. Employees
electing the defined contribution plan receive no postretirement health care benefits.
OPERS also offers a defined contribution plan, the Member-Directed Plan (MD). The MD plan does not
provide disability benefits, annual cost-of-living adjustments, postretirement health care benefits or death
benefits to plan members and beneficiaries. Benefits are entirely dependent on the sum of contributions and
investment returns earned by each participant’s choice of investment options.
Combined Plans
STRS offers a combined plan with features of both a defined contribution plan and a defined benefit plan. In
the combined plan, employee contributions are invested in self-directed investments, and the employer
contribution is used to fund a reduced defined benefit. Employees electing the combined plan receive
postretirement health care benefits.
OPERS also offers a combined plan. This is a cost-sharing, multiple-employer defined benefit plan that has
elements of both a defined benefit and defined contribution plan. In the combined plan, employee
contributions are invested in self-directed investments, and the employer contribution is used to fund a
reduced defined benefit. OPERS also provides retirement, disability, survivor, and postretirement health care
benefits to qualified members.
Postemployment Benefits
STRS provides other postemployment benefits (OPEB) to all retirees and their dependents, while OPERS
provides postretirement health care coverage to age and service retirants (and dependents) with 10 or
more years of qualifying Ohio service credit. Health care coverage for disability recipients and primary
survivor recipients is also available under OPERS. A portion of each employer’s contributions is set
aside for the funding of postretirement health care. For STRS, this rate was 1.0% of the total 14.00%,
while the OPERS rate was 4.0% of the total 14.00% for the year ended June 30, 2013.
33
The Ohio Revised Code provides the statutory authority for public employers to fund postretirement
health care through their contributions to STRS and OPERS. Postretirement health care under STRS is
financed on a pay-as-you-go basis. The amount contributed by the University to STRS to fund these
benefits for the years ended June 30, 2014, 2013 and 2012 was $558,035, $502,561 and $487,599,
respectively.
Postretirement health care under OPERS is advance-funded on an actuarially determined basis. The
amount contributed by the University to OPERS for OPEB funding for the years ended June 30, 2014,
2013 and 2012 was $3,811,411, $3,507,032 and $3,575,692, respectively.
NOTE 8 – RISK MANAGEMENT
The University is exposed to various risks of loss related to torts; theft of, damage to, and destruction of
assets; errors and omissions; injuries to employees; and natural disasters. On July 1, 1993, the University
joined with 11 other State-assisted universities in Ohio to form an insurance-purchasing pool for the
acquisition of commercial property and casualty insurance. The University pays annual premiums to the pool
for its property and casualty insurance coverage based on its percentage of the total insurable value to the
pool. Future contributions will be adjusted based upon each university’s loss history. Each university has a
base deductible of $100,000. The next $250,000 of any one claim is the responsibility of the pool, which has
a total annual aggregate deductible limit of $700,000. The commercial property insurer is liable for the
amount of any claim in excess of $350,000, or $100,000 in the event the pool has reached its annual limit.
There were no significant reductions in coverage from the prior year.
The University maintains a self-insured medical plan for its employees. The University’s risk exposure is
limited to claims incurred. There is a $150,000 specific stop loss for any given claim. The changes in the
total liability for actual and estimated medical claims for the years ended June 30, 2014 and 2013 are
summarized below:
2014
Liability at beginning of year
Claims Incurred
Claims Paid
IBNR-(Decrease) Increase in estimated claims
Liability at end of year
$
1,648,544
12,513,593
(12,294,668)
378,993
$
2,246,462
2013
$
$
1,157,274
11,327,149
(9,854,879)
(981,000)
1,648,544
Medical claims are based upon estimates of the claims liabilities. Estimates are based upon past
experience, medical inflation trends, and current claims outstanding, including year-end lag analysis.
Differences between the estimated claims payable and actual claims paid are reported as an operating
expense in the Statement of Revenue, Expenses, and Changes in Net Position.
The University participates in a State pool of agencies and universities that pays workers’ compensation
premiums into the State Insurance Fund on a pay-as-you-go basis (the Plan), which pays workers’
compensation benefits to beneficiaries who have been injured on the job. Losses from asserted and
unasserted claims for the participating state agencies and universities in the Plan are accrued by the Ohio
Bureau of Workers’ Compensation (the Bureau) based on estimates that incorporate past experience, as well
as other considerations including the nature of each claim or incident and relevant trend factors. Participants
in the Plan annually fund the workers’ compensation liability based on rates set by the Bureau to collect cash
needed in subsequent fiscal years to pay the workers’ compensation claims of participating State agencies and
universities. Settled claims resulting from these risks have not exceeded insurance coverage in any of the
past three fiscal years.
34
During the normal course of its operations, the University has become a defendant in various legal actions. It
is not possible to estimate the outcome of these legal actions; however, in the opinion of legal counsel and the
University administration, the disposition of these pending cases will not have a material adverse effect on the
financial condition or operations of the University. Settled claims resulting from these risks have not
exceeded insurance coverage in any of the past three fiscal years.
NOTE 9 – GRANT CONTINGENCIES
The University receives significant financial assistance from numerous federal, state and local agencies in
the form of grants. The disbursement of funds received under these programs generally requires compliance
with terms and conditions specified in the grant agreements and are subject to audit by the grantor agencies.
Any disallowed claims resulting from such audits could become a liability of the University. However, in
the opinion of the University administration, any such disallowed claims will not have a significant effect on
any of the financial statements of the University at June 30, 2014.
NOTE 10 – COMPONENT UNITS
The Foundation and the Corporation are legally separate not-for-profit entities organized for the purpose
of providing support to the University. Both the Foundation and the Corporation are exempt from federal
income taxes under Section 501(c)(3) of the Internal Revenue Code.
The Foundation acts primarily as a fundraising organization to supplement the resources that are available
to the University in support of its programs. The Board of the Foundation is self-perpetuating and
consists of business leaders and friends of the University. Although the University does not control the
timing or amount of receipts from the Foundation, the majority of resources, or income thereon, that the
Foundation holds and invests are restricted to the activities of the University by donors. Because these
restricted resources held by the Foundation can only be used by, or for the benefit of, the University, the
Foundation is considered a component unit of the University and is discretely presented in the
University’s financial statements. Complete financial statements for the Foundation can be obtained from
the Office of the Executive Director at 2121 Euclid Avenue, Union Building Room 501, Cleveland, OH
44115-2214.
The Foundation has reclassified net assets to reflect changes in donors’ restrictions that occurred during
the current year. In addition, the Foundation has reclassified net assets generated from net proceeds of
special events held prior to fiscal year 2009. The net proceeds generated from the special events were to
be used towards student scholarships. Management has determined that these funds should serve as
endowments from which the income would be available for scholarships; as such, net assets were
reclassified from temporarily restricted to permanently restricted.
During the years ended June 30, 2014 and 2013, the Foundation paid $8,230,552 and $7,440,132,
respectively, to the University. At June 30, 2014 and 2013, the University had receivables from the
Foundation totaling $2,580,949 and $2,206,072, respectively.
As authorized by the Board of Trustees, beginning in fiscal year 1998, the University placed Endowment and
Quasi-Endowment funds on deposit with the Foundation for investment. At June 30, 2014 and 2013, the
amount on deposit with the Foundation totaled $8,383,471 and $2,884,353, respectively.
35
The Foundation had the following types of investments as of June 30:
2014
Carrying
Value
Cost
Cash and cash equivalents
Stocks-domestic
Mutual Funds - International
Mutual Funds - Domestic
Fixed income securities
Alternative Investments
Investments carried at fair value
$
$
144,622
419,555
14,587,527
41,228,454
1,809,750
6,594,825
64,784,734
$
Note receivable
Investment in real estate, net of accumulated depreciation
Investments carried at adjusted cost
144,622
549,010
17,496,310
50,007,015
1,809,310
8,316,422
78,322,689
1,501,180
932,825
2,434,005
$
80,756,694
2013
Carrying
Value
Cost
Cash and cash equivalents
Stocks-domestic
Mutual Funds - International
Mutual Funds - Domestic
Fixed income securities
Alternative Investments
Investments carried at fair value
$
$
370,203
411,131
9,080,796
34,996,397
3,555,882
6,172,100
54,586,509
$
Note receivable
Investment in real estate, net of accumulated depreciation
Investments carried at adjusted cost
1,487,172
906,367
2,393,539
$
36
370,203
460,248
9,754,539
38,352,356
3,499,696
7,034,785
59,471,827
61,865,366
The temporarily and permanently restricted net assets of the Foundation are balances whose use by the
Foundation has been limited by the donors to a specific time period or purpose. Temporarily restricted
net assets are available, and permanently restricted net assets are held in perpetuity, for the following
purposes:
Instruction
Research
Public service
Academic support
Financial aid
Institutional support
Auxiliary enterprises
Temporarily
Restricted
$
7,819,583
1,172,735
5,787,157
313,609
18,132,406
1,495,531
1,359,873
$
36,080,894
Permanently
Restricted
$ 5,765,560
148,349
88,975
2,373,045
39,494,192
1,875,917
730,545
$ 50,476,583
The Corporation was organized primarily to further the educational mission of the University by
developing, owning and managing housing for the students, faculty and staff of the University. The
Board of the Corporation is self-perpetuating and the University does not control the Corporation.
Because the housing owned by the Corporation can only be used by, or for the benefit of, the University’s
students, faculty and staff, the Corporation is considered a component unit of the University and is
discretely presented in the University’s financial statements.
As of June 30, 2014 and 2013, the Corporation had the following types of investments:
FY14
$18,524,003
3,562,168
184,770
605,521
$22,876,462
Money Market Funds
Certificates of Deposit
Exchange Traded Funds
Mutual Funds
FY13
$14,585,378
3,562,168
$18,147,546
On March 1, 2005, the Corporation leased the Fenn Tower building, located on the University’s campus,
from the University. Annual rent is equal to the net available cash flows from the Fenn Tower project.
No rent was paid during fiscal years 2014 and 2013. On March 1, 2005, the Corporation entered into a
Development Agreement with American Campus Communities (ACC) to plan, design and construct
housing units in Fenn Tower. In addition, the Corporation entered into a Management Agreement with
ACC to manage Fenn Tower. The project was completed in August 2006. The facility has the capacity
to house 430 residents.
On March 17, 2005, the Corporation issued $34,385,000 of Cleveland-Cuyahoga County Port Authority
bonds (Series 2005 Bonds) to finance the costs of the Fenn Tower project. The Series 2005 Bonds are
serial bonds maturing between 2007 and 2036. Interest rates are fixed and vary from 3.0% to 4.5%.
37
On June 1, 2008, the Corporation leased land, owned by the University and located on its campus, from
the University. On August 22, 2008, the Corporation entered into a design-build agreement to construct a
623-car parking garage on the site. On July 1, 2008, the Corporation entered into a lease agreement with
the University to operate the garage once construction is completed. On July 25, 2008, the Corporation
issued $14,500,000 of tax-exempt bonds with the Cleveland-Cuyahoga County Port Authority to finance
construction of the garage. The Series 2008 Bonds are serial bonds maturing between 2009 and 2040.
They bear variable interest rates that reset weekly. The interest rate is set at rates based upon yield
evaluations at par of comparable securities. The interest rate was 0.06% at June 30, 2014. Construction
of the garage was completed in August 2009.
On December 18, 2009, the Corporation leased land, owned by the University and located on its campus,
from the University. On August 24, 2009, the Corporation entered into a development agreement with
ACC to plan, design and construct 600 beds of student housing and a 300-car parking garage on this land.
In addition, the Corporation entered into a management agreement with ACC to manage the student
housing. On December 18, 2009, the Corporation issued $59,005,000 of County of Cuyahoga, Ohio
bonds (Series 2009 bonds) to finance the project. The 2009 bonds are serial bonds maturing between
2011 and 2042. They bear variable interest rates that are reset weekly. The interest rate is set at rates
based upon yield evaluations at par of comparable securities. The interest rate was 0.06% at June 30,
2014. Both phases of the project were complete as of August 2011.
Principal and interest payable for the next five years and in subsequent five-year increments are as
follows:
2015
2016
2017
2018
2019
2020-2024
2025-2029
2030-2034
2035-2039
2040-2042
Principal
Interest
1,655,000
1,521,925
1,815,000
1,491,553
1,975,000
1,457,868
2,170,000
1,416,720
2,380,000
1,373,348
11,660,000
6,112,570
15,045,000
4,623,250
19,520,000
2,816,063
32,815,000
770,858
13,620,000
24,345
$ 102,655,000 $
21,608,500
Complete financial statements for the Corporation can be obtained from the Office of the Vice President
for Business Affairs and Finance at 2121 Euclid Avenue, Administration Center Room 209, Cleveland,
OH 44115-2214.
38